Unwrapping the Enigma of NRI Gift Tax Rules

We enjoy receiving gifts. Gifts may involve a great deal of emotion and custom. When it comes to gifts of currency or property, however, we must consider mundane and practical factors such as rules and taxation.

NRI Gift Tax Rules in India

The Income Tax Act defines a gift as any property received without consideration, such as money or its equivalent. It may include currency, movable property, immovable property, jewelry, and other items.

• Gifting immovable property to a Non-resident Indiann is permissible so long as the annual remittance of sales proceeds does not exceed $1,000,000 USD.
• NRIs can receive gifts of shares and securities from relatives so long as the gifts do not exceed 5% of the company’s paid-up capital, the sectoral limit is not exceeded, and the NRI is eligible to hold the securities.
• A scholarship or gift from an educational institution is not taxable.
• If the gifts are an immovable property that is located outside of India, it is exempt from taxation.
• When computing income tax, the value of the gifts cannot be deducted.
• Income received from a gift in India is taxable in India regardless of the recipient’s or donor’s residency status.
• Gifts of cash in excess of Rs. 2,00,000 may be penalized. Ensure that you receive the appropriate gift through cheques or bank transfers.

Gift by NRI to Resident Indian

• Gifts from NRI Relative are exempt from tax – When an NRI gives cash, a cheque, objects, or property to a Resident Indian who is a relative, both the donor and the recipient are exempt from tax in India.
• When an NRI gives gifts of up to Rs. 50,000 in cash, cheque, items, or property to a Resident Indian who is not a relative, both donor and recipient are exempt from tax in India.
• When an NRI gives gifts in excess of Rs. 50,000 to a non-relative Resident Indian in cash, checque, items, or property, the recipient is responsible for paying the NRI gift taxes India. The amount received is added to the recipient’s income and taxed according to the income tax bracket that applies to the recipient.
• When an NRI gives cash, a cheque, items, or property to a Resident Indian for marriage or through a will, both the donor and the recipient are exempt from tax in India regardless of their’relative’ status.

Gift to NRI by Resident Indian

• Gifts to NRI Relatives are exempt from tax. When a resident Indian gives a gift of cash, a cheque, objects, or property to an NRI who is a relative, both the donor and the recipient are exempt from Gift tax in India.
• When a resident Indian gives a non-relative NRI a gift of up to Rs. 50,000 in cash, cheque, items, or property, both parties are exempt from taxation in India.
• When a resident Indian gives gifts of more than Rs. 50,000 in cash, cheque, items, or property to a non-relative NRI, the recipient is responsible for paying the India gift tax NRI. The amount received is added to the recipient’s income and taxed according to the recipient’s income tax bracket. The annual limit for such donations is $250,000. [This limit is defined by LRS (Liberated Remittance Scheme) – the total amount of foreign exchange purchased from or remitted via all sources in India.]
• When a resident Indian gives gifts of cash, cheque, items, or property to a Nonresident Indian for marriage or through a will, both the donor and the recipient are exempt from tax in India regardless of their’relative’ status.
• The total value of gifts made by an Indian resident in the form of shares or securities of an Indian company cannot exceed USD 50,000 in a single fiscal year. The gift must comply with RBI regulations pertaining to NRIs holding stock in Indian companies.

The information I provided in the above post is only a portion of the narrative; issues can be complicated depending on your resident status. In the United States, you can give up to $15,000 per year. This is merely an illustration of how complex the situation is. Check the laws of the countries where you intend to reside.